Friday, October 02, 2009

On The Margin: Total Unemployment September 2009

Today’s Employment Situation report showed that in September “total unemployment” increased to 17.0% of the civilian population or 40.1 million people.

The traditional unemployment rate is calculated from the monthly household survey results using a fairly explicit qualification of “unemployed” (essentially unemployed and currently looking for full time employment) leaving many workers to be considered effectively “on the margin” either employed in part time work when full time is preferred or simply unemployed and no longer looking for work.

The Bureau of Labor Statistics considers “marginally attached” workers (including discouraged workers) and persons who have settled for part time employment to be “underutilized” labor.

The broadest view of unemployment would include both traditionally unemployed workers and all other underutilized workers.

To calculate the “total” rate of unemployment we would simply use this larger group rather than the smaller and more restrictive “unemployed” group used in the traditional unemployment rate calculation.

Below is a chart (click for larger version) showing the “total” unemployment rate versus the “traditional” unemployment rate along with the year-over-year percent change to the “total” unemployment rate.

Notice that the “total” unemployment rate jumped 51.79% on a year-over-year basis while the spread between the “traditional” and “total” unemployment rates now stands at 7.2%.

The chart below (click for larger) calculates the spread between the “total” unemployment rate and the “traditional” unemployment rate.